Tesco and Morrison's see further falls in market share as discounters turn the screw, though Sainsbury's and Asda improve

Among the ‘Big Four’ supermarket chains, Morrison's and Tesco have continued to see their market share decline in the face of stiff competition from the discounters, but Sainsbury's and Asda saw an improvement according to the latest monthly figures.

Supermarket inflation fell to 0.8 per cent in the 12 weeks to June 22, its lowest level for almost eight years according to the latest till-roll data from Kantar Worldpanel, which is the lowest level the research group has seen since it began collecting this data in October 2006.

Kantar puts this fall down to the growing supermarket price war sparked by the country's big four grocers as their market shares are squeezed by discounters such as Aldi and Lidl.

Under pressure: Market share slides continued for William Morrison and Tesco as the discounters turned the crew.

Tesco and Morrison’s have already responded by cutting prices, while Asda has also pledged to make reductions, and Sainsbury's has vowed to remain competitive, raising analysts' concerns about a possible price war hitting earnings across the sector.

Morrison’s' market share dropped to 10.9 per cent from 11.7 per cent as sales fell 3.8 per cent, while Tesco's market share dipped to 28.9 per cent from 30.3 per cent last year as sales slipped 1.9 per cent over the quarter.

However, the other two majors fared better, with Sainsbury's sales rising 3 per cent and its market share inching up to 16.7 per cent from 16.6 per cent a year ago. Asda's sales grew by 3.6 per cent and its market share lifted to 17.1 per cent from 16.9 per cent.

Broker Morgan Stanley said in a note: ‘We believe that it is no coincidence that the two retailers with the clearest strategy/positioning are experiencing better fortunes than their two main conventional competitors.’

King gone: Sainsbury's CEO Justin King steps down this month after a decade in the top job.

But the star performers of the grocery sector continue to be the German discount operations Aldi and Lidl, who both held onto their record market shares from the last 12-week period of 4.7 per cent and 3.6 per cent respectively.

In the last two weeks, Lidl said it will spend £220million opening 20 stores this year, creating 2,500 jobs, while Sainsbury's said it is to enter the discount market in a joint venture with Danish discounter Netto as part of a £25million plan that will see 15 stores opened in the north of England by 2015.

At the upmarket end of the sector, Waitrose saw its sales rise 6.9 per cent and boosted its market share to 5 per cent from 4.8 per cent.

The overall supermarket sector saw sales grow 2.8 per cent, bouncing back from the previous period's historic low of 1.7 per cent growth.

‘The outlook is positive as we predict continuing sub 1 per cent levels into the near future, providing some relief for cash-strapped consumers.’

Shareholders in the listed supermarket chains suffered, however, with all three stocks lower in late afternoon trade – Tesco shed 3.5p at 280.6p, Morrison’s fell 4.6p to 178.8p, and Sainsbury’s was off 3.3p at 312.2p.